Tech view: Nifty forms Hammer-like pattern; short covering can lift it more

NEW DELHI: The Nifty50 hit a record high and settled a tab below the 10,300 mark that it had hit midway through the session. The index broke out of the consolidation range of last two months and formed a Hammer-like pattern on the daily chart.

Nifty’s near-term chart suggests if the Nifty50 manages to cross the 10,320 level on a closing basis, it may trigger short covering, which could lift it towards the 10,380-10,420 range in the near term, said Chandan Taparia of Motilal Oswal Securities.

Taparia said the 10,220 level would now act as support for minor corrective action, if any, ahead of the expiry of October series futures & options contracts.

It seems the index respected the 127 per cent retracement level at 10,315 and hence, going forward, traders need to closely keep a watch on whether the index can stay above this hurdle.

“If this happens, we may see continuation of this relentless rally. Traders are advised to stay light on positions. If you are not going long on PSBs, it’s understandable; but one needs to strictly avoid going short on them,” said Sameet Chavan, Chief Analyst for Technical and Derivatives, at Angel Broking.

The index hit a record high 10,340 by surpassing the previous high of 10,251 by a wide margin. It eventually settled the day at 10,295, up 87 points, or 0.86 per cent.

“The indices are likely to pause in the next trading session. Even market breadth suggests the same thing. We can expect the Nifty50 to target the 10,380-10,430 levels, whereas weakness shall re-emerge if it closes below the 10,237 mark,” said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in.